Gold and Silver Fall as Iran War Pressures the Price of Oil, Rate Hike Odds Climb

 

Gold and Silver Fall as Iran War Pushes Oil Higher, Rate Hike Odds Climb

(Bullion News Network) – Precious metal prices retreated again on Friday, punctuating a week straight of losses for both silver and gold. The spot price of gold shed nearly $150 per troy ounce, bringing its total weekly losses to more than 10%. Silver followed a similar trajectory, dropping by over $4.75/ozt for a total loss on the week of more than 15%. The price action on Friday favored gold, driving the gold-silver ratio more than 2.25 points lower to approximately 66.17:1. Stocks tumbled on Friday as oil prices continued to rise, with the Nasdaq, S&P 500, and Dow closing the week on heavy losses. The war in Iran continued this week, with the U.S. deploying thousands of additional troops to aid in the war effort.

This week, United States officials confirmed that an additional 2,500 U.S. Marines and three more warships are being deployed in the war effort. Currently, there are an estimated 50,000 American troops stationed in the Middle East. An AP News source told reporters on Thursday that the Pentagon is attempting to secure an additional $200 billion to fund the war against Iran, which began at the end of February. These funds would require the approval of Congress. With the war in Iran showing few signs of slowing, rising oil prices due to Iran’s blockage of the Strait of Hormuz continued to put pressure on American markets throughout the week. While safe haven assets like gold tend to thrive in uncertain environments, gold prices may be anchored by rising inflation fears, which are impacting the medium-term outlook for Fed interest rates.

CME FedWatch ended the trading week on Friday with a rate cut probability projection of 0%, with the odds of a rate hike increasing to more than 10% for the first time in 2026. The war in Iran, coupled with rising oil prices, poses an upside risk to inflation, which could indefinitely delay the Fed’s efforts to resume cutting interest rates. If inflation remains sticky in the coming months, the FOMC could conceivably even vote to raise rates in order to respond to rising consumer prices.

Gold and silver prices sank on the Fed’s latest rate cut decision. On Wednesday, the FOMC decided to leave interest rates unchanged. During the post-meeting press conference, Federal Reserve Chair Jerome Powell told reporters that rising oil prices pose a near-term risk to the inflation rate. Powell also emphasized the role that the war in Iran could play in stoking uncertainty, especially as it pertains to the U.S. economy.

Near-term measures of inflation expectations have risen in recent weeks, likely reflecting the substantial rise in oil prices caused by supply disruptions in the Middle East […] The implications of events in the Middle East for the U.S. economy are uncertain. In the near term, higher energy prices will push up overall inflation, but it is too soon to know the scope and duration of the potential effects on the economy.

Safe haven assets like gold and silver are often inversely correlated with interest rates, as cutting rates is often an inflationary action that the FOMC takes. The rising probability that the FOMC will raise rates at its next meeting is a troubling signal for gold, as it is not an interest-bearing asset. Additionally, sell-offs and profit-taking throughout this week may have accelerated the downward momentum in the gold and silver markets.

Next week, traders will be able to review speeches from several key Federal Reserve officials, including Michael Barr, Stephen Miran, Lisa Cook, and Philip Jefferson. These speeches may provide a bit more insight into how Fed officials view the war in Iran’s potential impact on consumer prices, as well as the interest rate outlook for the remainder of 2026.

The spot price of gold retreated on Friday, retreating by more than $150 per troy ounce in the market’s fifth consecutive losing day. Silver logged its fourth loss in a row, shedding more than $4.75 per troy ounce and falling below the $70/ozt level. In the coming weeks, the war in Iran and speculation surrounding the Federal Reserve’s next rate cut call should play outsized roles in driving demand for safe haven assets like gold and silver.